-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VKbbwXT6WB8bKMJSlo/8a7SMVMyTeyiin5DD5X2xLYOA8ZUuiohViOSXzio59iaF oVJ++KxD8KT+f7aJzvncwQ== 0000950152-96-004662.txt : 19960916 0000950152-96-004662.hdr.sgml : 19960916 ACCESSION NUMBER: 0000950152-96-004662 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960803 FILED AS OF DATE: 19960913 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN EAGLE OUTFITTERS INC CENTRAL INDEX KEY: 0000919012 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 251724320 STATE OF INCORPORATION: OH FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23760 FILM NUMBER: 96629682 BUSINESS ADDRESS: STREET 1: 150 THORN HILL DR CITY: WARRENDALE STATE: PA ZIP: 15095 BUSINESS PHONE: 4127764857 MAIL ADDRESS: STREET 1: 150 THORN HILL DRIVE STREET 2: P O BOX 788 CITY: WARRENDALE STATE: PA ZIP: 15095 10-Q 1 AMERICAN EAGLE 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 3, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________to______________ COMMISSION FILE NUMBER: 0-23760 AMERICAN EAGLE OUTFITTERS, INC. (Exact name of registrant as specified in its charter) OHIO NO. 25-1724320 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 150 THORN HILL DRIVE, WARRENDALE, PA 15086-7528 (Address of principal executive offices) (Zipcode) (412) 776-4857 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. COMMON STOCK, NO PAR VALUE, 9,885,400 SHARES OUTSTANDING AS OF AUGUST 21, 1996 2 AMERICAN EAGLE OUTFITTERS, INC. TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements Consolidated Balance Sheets August 3, 1996 (unaudited) and February 3, 1996 3 Consolidated Statements of Operations (unaudited) Three months ended and six months ended August 3, 1996 and July 29, 1995 4 Consolidated Statements of Cash Flows (unaudited) Six months ended August 3, 1996 and July 29, 1995 5 Notes to Consolidated Financial Statements 6-7 Review By Independent Accountants 8 Independent Accountants' Review Report 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 2. Changes in Securities N/A Item 3. Defaults Upon Senior Securities N/A Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information N/A Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 Exhibit 23 Acknowledgment of Independent Accountants 15
3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED BALANCE SHEETS
(In thousands, except common stock share amounts) August 3, February 3, 1996 1996 ---- ---- (Unaudited) ASSETS Current assets: Cash and cash equivalents $16,327 $19,986 Merchandise inventory 34,329 23,394 Receivables 2,667 5,642 Prepaid expenses and other 4,830 4,429 Deferred income taxes 4,710 2,891 ------- ------- Total current assets 62,863 56,342 ------- ------- Fixed assets: Fixtures and equipment 21,786 26,447 Leasehold improvements 31,324 30,326 ------- ------- 53,110 56,773 Less: Accumulated depreciation and amortization 20,923 23,044 ------- ------- 32,187 33,729 ------- ------- Notes receivable -- 3,568 Other assets 2,310 1,724 ------- ------- Total assets $97,360 $95,363 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $22,015 $16,166 Accrued compensation and payroll taxes 4,088 4,255 Accrued rent 5,422 4,550 Accrued income and franchise taxes 1,406 3,536 Other liabilities and accrued expenses 2,834 3,060 ------- ------- Total current liabilities 35,765 31,567 ------- ------- Stockholders' equity: Common stock, 30,000,000 shares authorized and 10,005,400 shares issued (10,000,000 shares at February 3, 1996) 52,535 52,507 Contributed capital 4,262 4,262 Retained earnings 8,549 11,194 ------- ------- 65,346 67,963 Less: Deferred compensation 2,235 2,651 Treasury stock, 125,000 shares 1,516 1,516 ------- ------- Total stockholders' equity 61,595 63,796 ------- ------- Stockholders' equity Total liabilities and stockholders' equity $97,360 $95,363 ======= =======
See notes to Consolidated Financial Statements 3 4 AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts)
Three Months Ended Six Months Ended ------------------ ---------------- August 3, July 29, August 3, July 29, 1996 1995 1996 1995 ---- ---- ---- ---- Net sales $70,257 $65,337 $124,653 $113,754 Cost of sales, including certain buying, occupancy and warehousing expenses 49,018 47,234 89,804 89,319 ------- ------- -------- -------- Gross profit 21,239 18,103 34,849 24,435 Selling, general and administrative expenses 19,419 18,573 36,705 35,306 Depreciation and amortization 1,526 1,469 3,093 2,780 ------- ------- -------- -------- Operating income (loss) 294 (1,939) (4,949) (13,651) Interest income (expense), net 275 (460) 589 (553) ------- ------- -------- -------- Income (loss) before income taxes 569 (2,399) (4,360) (14,204) Provision (benefit) for income taxes 223 (846) (1,715) (5,728) ------- ------- -------- -------- Net income (loss) $ 346 $(1,553) $ (2,645) $ (8,476) ======= ======= ======== ======== Net income (loss) per common share $ 0.04 $ (0.16) $ (0.27) $ (0.85) ======= ======= ======== ======== Weighted average common shares outstanding 9,877 10,000 9,876 10,000 ======= ======= ======== ======== Retained earnings, beginning $ 8,203 $ 5,604 $ 11,194 $ 12,527 Net income (loss) 346 (1,553) (2,645) (8,476) ------- ------- -------- -------- Retained earnings, ending $ 8,549 $ 4,051 $ 8,549 $ 4,051 ======= ======= ======== ========
See notes to Consolidated Financial Statements 4 5 AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH (Unaudited) (In thousands)
Six Months Ended ---------------- August 3, July 29, 1996 1995 ---- ---- Net loss $ (2,645) $ (8,476) ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES: Depreciation and amortization 3,093 2,780 Loss on disposal 912 175 Restricted stock compensation 416 528 Deferred income taxes (2,094) (308) CHANGES IN ASSETS AND LIABILITIES: Merchandise inventory (10,935) (28,982) Receivables 2,975 1,142 Prepaid and other (775) (4,419) Accounts payable 5,849 12,123 Accrued liabilities (1,664) (2,683) -------- -------- Total adjustments (2,223) (19,644) -------- -------- Net cash used for operating activities (4,868) (28,120) -------- -------- INVESTING ACTIVITIES: Capital expenditures (4,686) (10,501) Collection on notes from sale of outlet stores 3,568 -- Proceeds from sales of fixed assets 2,299 -- -------- -------- Net cash provided by (used for) investing activities 1,181 (10,501) -------- -------- FINANCING ACTIVITIES: Net borrowings on notes payable -- 28,800 Exercise of stock options 28 -- -------- -------- Net cash provided by financing activities 28 28,800 -------- -------- Net increase (decrease) in cash (3,659) (9,821) Cash - beginning of period 19,986 10,363 -------- -------- Cash - end of period $ 16,327 $ 542 ======== ========
See notes to Consolidated Financial Statements 5 6 AMERICAN EAGLE OUTFITTERS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. INTERIM FINANCIAL STATEMENTS The accompanying Consolidated Financial Statements of American Eagle Outfitters, Inc. (the "Company") at August 3, 1996 and for the three and six month periods ended August 3, 1996 (the "current period") and July 29, 1995 (the "prior period") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The Consolidated Balance Sheet at February 3, 1996 was derived from the audited financial statements. The Company's business is affected by the pattern of seasonality common to most retail apparel businesses. The results for the current and prior periods are not necessarily indicative of future financial results. Certain notes and other information have been condensed or omitted from the interim Consolidated Financial Statements presented in this Quarterly Report on Form 10-Q. Therefore, these Consolidated Financial Statements should be read in conjunction with the Company's Transition 1996 Annual Report. 2. BASIS OF PRESENTATION ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates. EARNINGS PER SHARE Earnings per share have been computed based upon the weighted average number of common shares outstanding during the periods presented. Common share equivalents, principally in the form of employee stock option awards, are not reflected in the common stock outstanding as they either have a nominal effect on the number of shares outstanding or are anti-dilutive. RECLASSIFICATION Certain reclassifications have been made to the Consolidated Financial Statements for the prior period in order to conform to the August 3, 1996 presentation. 3. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Because no borrowings were required under the terms of the Company's line of credit, there were no amounts paid for interest during the six months ended August 3, 1996. Interest costs were $0.6 million during the six months ended July 29, 1995. Income tax payments were $2.6 million and $0.2 million during the six months ended August 3, 1996 and July 29, 1995, respectively. 4. RELATED PARTY TRANSACTIONS As described in the information that follows, the Company has various transactions with related parties. The nature of the relationship is primarily through common ownership. The Company has an operating lease for its corporate headquarters and distribution center with an affiliate of the Company. The lease, which was entered into on January 1, 1996, and expires on December 31, 2010, provides for annual rental payments of approximately $1.2 million through 2001, $1.6 million through 2006, and $1.8 million through the end of the lease. In addition, the Company purchases merchandise from and sells merchandise to various related parties and uses the services of a related importing company. 6 7 Transactions with these related parties and associated balance sheet amounts were as follows: (In thousands)
Three Months Ended Six Months Ended ------------------ ---------------- August 3, July 29, August 3, July 29, 1996 1995 1996 1995 ---- ---- ---- ---- Merchandise purchases plus import administrative charges $11,724 $11,652 $18,800 $22,322 Accounts payable $ 8,527 $16,264 $ 8,527 $16,264 Accounts receivable $ 1,313 $ 1,066 $ 1,313 $ 1,066 Rent expense $ 388 $ 728 $ 783 $ 1,062 Merchandise sales $ 802 $ 809 $ 980 $ 1,332
The Company has provided loans to certain officers and other individuals to pay the taxes on the restricted stock that vested in April 1995. As of August 3, 1996, the outstanding value of these loans, including interest at 6.8%, approximated $356,000 as compared with $345,000 at February 3, 1996. 5. INCOME TAXES The provisions of FASB No. 109, "Accounting for Income Taxes", have been reflected in the accompanying Consolidated Financial Statements. For the three months and six months ended August 3, 1996 and July 29, 1995, the effective tax rate used to provide income tax amounts was 39.3%. 6. LEGAL PROCEEDINGS On November 30, 1995, a complaint was filed in the United States District Court for the Western District of Pennsylvania under the caption Thomas G. DiCicco v. American Eagle Outfitters, Inc., et al., No. 95-1937, as a class action on behalf of purchasers of the Company's common stock during the period August 4, 1994 through October 26, 1995. It alleged violations of the federal securities laws arising out of purported misrepresentations and non-disclosures concerning the Company and its financial condition. The matter has been settled on a basis satisfactory to the Company. A settlement agreement has been entered into, subject to court approval, which approval is anticipated by the end of the calendar year. Earnings as reported reflect full settlement of the lawsuit. 7 8 REVIEW BY INDEPENDENT ACCOUNTANTS Ernst & Young LLP, our independent accountants, have performed a limited review of the Consolidated Financial Statements for the quarters ended August 3, 1996 and July 29, 1995, as indicated in their report on the limited review included below. Since they did not perform an audit, they express no opinion on the Consolidated Financial Statements referred to above. Management has given effect to any significant adjustments and disclosures proposed in the course of the limited review. INDEPENDENT ACCOUNTANTS' REVIEW REPORT The Board of Directors and Stockholders American Eagle Outfitters, Inc. We have reviewed the accompanying consolidated balance sheet of American Eagle Outfitters, Inc. as of August 3, 1996, and the consolidated statements of operations for the three-month and six-month periods ended August 3, 1996, and July 29, 1995 and the statement of cash flows for the six-month periods ended August 3, 1996 and July 29, 1995. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any modifications that should be made to the accompanying financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of American Eagle Outfitters, Inc. as of February 3, 1996, and the related consolidated statements of operations and cash flows for the year then ended (not presented herein) and in our report dated March 29, 1996 we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of February 3, 1996, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Pittsburgh, Pennsylvania August 23, 1996 8 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the percentage relationship to net sales of the listed items included in the Company's Consolidated Statements of Operations.
Three months ended Six months ended ------------------ ---------------- Aug. 3, July 29, Aug.3, July 29, 1996 1995 1996 1995 ---- ---- ---- ---- Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales, including certain buying, occupancy and warehousing expenses 69.8 72.3 72.0 78.5 ----- ----- ----- ----- Gross profit 30.2 27.7 28.0 21.5 Selling, general and administrative expenses 27.6 28.4 29.4 31.0 Depreciation and amortization 2.2 2.3 2.5 2.4 ----- ----- ----- ----- Operating income (loss) 0.4 (3.0) (3.9) (11.9) Interest income (expense), net 0.4 (0.7) 0.5 (0.5) ----- ----- ----- ----- Income (loss) before income taxes 0.8 (3.7) (3.4) (12.4) Provision (benefit) for income taxes 0.3 (1.3) (1.4) (5.0) ----- ----- ----- ----- Net income (loss) 0.5% (2.4)% (2.0)% (7.4)% ===== ===== ===== =====
COMPARISON OF THREE MONTHS ENDED AUGUST 3, 1996 TO THREE MONTHS ENDED JULY 29, 1995 Net sales for the three months ended August 3, 1996 (the "current period") increased 20.5% to $70.3 million from $58.3 million for the three months ended July 29, 1995 (the "prior period"). When including $7.0 million from outlet stores which were sold in October 1995 in last year's sales, sales would have increased 7.5%. Comparable store sales increased 10.0% compared to the prior period. The Company operated 282 stores, excluding 3 temporary locations, at the end of the current period, compared to 297 stores, including 32 outlet stores and excluding 17 temporary locations, operated at the end of the prior period. The total increase in net sales resulted primarily from an increase in the average unit selling price rather than from an increase in units sold. The increase in average unit selling price in the current period as compared to the prior period resulted from the inclusion of outlet store unit sales in last year's results. The unit sales at the outlet stores (which were sold in October 1995) were typically at lower price points and therefore lowered the average unit selling price in the prior period. The average unit selling price for the ongoing American Eagle Outfitters chain stores has increased nominally for the current period as compared to the prior period. Gross profit for the current period increased to $21.2 million from $18.1 million for the prior period. Gross profit as a percent of net sales for the current period increased to 30.2% from 27.7% for the prior period. The increase in gross profit was attributable to higher initial mark-ups, lower markdowns and a decrease in inventory shrinkage costs compared to the prior period. Selling, general and administrative expenses for the current period increased to $19.4 million from $18.6 million for the prior period. As a percent of net sales, these expenses decreased to 27.6% from 28.4% for the prior period. The increase of $0.8 million resulted primarily from an increase in write-offs related to fixture upgrades at the stores and increases in impairment reserves on fixed assets in the amount of $0.6 million. The prior period included approximately $0.1 million in fixture write-offs. Additionally, expenses in connection with the tentative settlement of the class action suit in the amount of $0.3 were incurred in the current period (See Note 6 to the Consolidated Financial Statements). The 0.8% improvement as a percent to sales was due to greater sales leverage and better expense controls in areas such as payroll. 9 10 Depreciation and amortization expense for the current period remained at $1.5 million and represented 2.2% of sales in the current period as compared to 2.3% of sales in the prior period. Interest income for the current period was $0.3 million compared to interest expense of $0.5 million for the prior period. Interest income was generated because no borrowings were required under the terms of the Company's line of credit during the quarter ended August 3, 1996. Income before income taxes for the current period increased to $0.6 million from a $2.4 million net loss for the prior period. As a percent of net sales, income before income taxes for the current period increased to 0.8% from (3.7%) for the prior period. The increase in income before income taxes of $3.0 million was primarily a result of the favorable sales performance, higher margins attributable to higher initial mark-ups, lower markdowns, lower inventory shrinkage, and reduced interest costs. COMPARISON OF SIX MONTHS ENDED AUGUST 3, 1996 TO SIX MONTHS ENDED JULY 29, 1995 Net sales for the six months ended August 3, 1996 (the "current period") increased 23.5% to $124.7 million from $101.0 million for the six months ended July 29, 1995 (the "prior period"). When including the $12.8 million in last year's sales for the sold outlet stores, sales increased 9.6%. Comparable store sales were up 9.9% versus the prior period. The Company operated 282 stores, excluding 3 temporary locations, at the end of the current period, compared to 297 stores, including 32 outlet stores and excluding 17 temporary locations, operated at the end of the prior period. The total increase in net sales resulted primarily from an increase in the average unit selling price rather than from an increase in units sold. The increase in average unit selling price in the current period as compared to the prior period resulted from the inclusion of outlet store unit sales in last year's results. The unit sales at the outlet stores (which were sold in October 1995) were typically at lower price points and therefore lowered the average unit selling price in the prior period. The average unit selling price for the ongoing American Eagle Outfitters chain stores has increased nominally for the current period as compared to the prior period. Gross profit for the current period increased to $34.8 million from $24.4 million for the prior period. Gross profit as a percent of net sales for the current period increased to 28.0% from 21.5% for the prior period. The increase in gross profit was attributable to both higher initial mark-ups and a decrease in markdowns. Selling, general and administrative expenses for the current period increased to $36.7 million from $35.3 million for the prior period. As a percent of net sales, these expenses decreased to 29.4% from 31.0% for the prior period. The increase of $1.4 million resulted primarily from an increase in write-offs related to fixture upgrades at the stores and increases in impairment reserves on fixed assets in the amount of $0.7 million in the current period versus $0.1 million in fixture write-offs in the prior period. Additionally, expenses in connection with the tentative settlement of the class action suit in the amount of $0.5 were incurred in the current period (See Note 6 to the Consolidated Financial Statements). The 1.6% improvement as a percent to sales was due to greater sales leverage and better expense controls in areas such as payroll. Depreciation and amortization expense for the current period increased to $3.1 million and 2.5% of sales as compared to $2.8 million and 2.4% of sales in the prior period. The increase in expense related primarily to additions for new stores that were opened. Interest income for the current period was $0.6 million compared to interest expense of $0.6 million for the prior period. Interest income was generated because no borrowings were required under the terms of the Company's line of credit during the six months ended August 3, 1996. The loss before income taxes for the current period decreased to $4.4 million from a $14.2 million net loss for the prior period. As a percent of net sales, loss before income taxes for the current period decreased to 3.4% from 12.4% for the prior period. The decrease in the loss before income taxes of $9.8 million was primarily a result of the favorable sales performance, higher margins attributable to higher mark-ups and lower markdowns, and reduced interest costs. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of working capital are cash and cash equivalents provided by operating activities and borrowings under its revolving credit facility. The primary uses of working capital are for the acquisition of inventory and fixed assets. The Company had working capital of $27.1 and $24.8 million at August 3, 1996 and February 3, 1996, respectively. The current period increase resulted from higher inventory levels planned for the back-to-school selling season, net of increases in accounts payable. For the six months ended August 3, 1996, the cash used for operating activities of $4.9 million was primarily the result of inventory increases net of accounts payable increases and the net loss for the six month period. 10 11 At August 3, 1996, the Company had an unsecured demand lending arrangement with a bank to provide a $60.0 million line of credit at either the lender's prime lending rate ( 8.25% at August 3, 1996) or a negotiated rate such as LIBOR. The facility has a limit of $40.0 million that can be used for direct borrowing. No borrowings were outstanding and letters of credit in the amount of $33.1 million were outstanding at August 3, 1996. The remaining available balance on the line was $26.9 million at August 3, 1996. Additionally, the Company had $16.3 million of cash and short-term investments on hand as of August 3, 1996. Capital expenditures, net of construction allowances, totaled $4.7 million for the six months ended August 3, 1996. These expenditures included the addition of thirteen new store locations, six store remodels and replacement of fixtures in existing stores. The number of new store openings currently planned for the remaining of the fiscal year is approximately 22, although the number may be increased or decreased depending on the availability of suitable retail space for expansion. The Company believes that the cash flow from operations and its bank line of credit together with available cash on hand will be sufficient to meet its presently anticipated cash flow requirements through fiscal 1996. SEASONALITY AND GENERAL ECONOMIC CONDITIONS The Company desires to take advantage of the new "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The statements contained in this report which are not historical facts are "forward looking statements" that involve various important risks, uncertainties and other factors which could cause the Company's actual results for fiscal 1996 and beyond to differ materially from those expressed in such forward looking statements. These important factors include, without limitation, the risks and factors set forth below, as well as other risks previously disclosed in the Company's securities filings. Historically, the Company's operations have been seasonal, with highest sales and net income occurring in the fourth fiscal quarter, reflecting increased demand during the year-end holiday selling season and, to a lesser extent, the third quarter, reflecting increased demand during the back-to-school selling season. The Company's results of operations will also fluctuate from quarter to quarter in the future as a result of numerous other factors. These include factors the Company cannot control that impact mall-based apparel retailers generally, such as factors affecting the amount of traffic in enclosed shopping malls and regional and national economic conditions affecting disposable consumer incomes. They also include factors over which the Company has some control, such as distinguishing itself from its competitors based on the quality and design of its private label brand names, identifying and responding to fashion trends in a timely manner, the ability to direct source merchandise closer to need and in appropriate quantities, the ability to retain qualified personnel and the number and timing of the opening of new stores. Any one or a combination of these factors could have a material adverse affect on the Company's results of operations and financial condition. IMPACT OF INFLATION The Company does not believe that the relatively modest levels of inflation which have been experienced in the United States in recent years have had a significant effect on its net sales or its profitability. Substantial increases in cost, however, could have a significant impact on the Company and the industry in the future. 11 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings On November 30, 1995, a complaint was filed in the United States District Court for the Western District of Pennsylvania under the caption Thomas G. DiCicco v. American Eagle Outfitters, Inc., et al., No. 95-1937, as a class action on behalf of purchasers of the Company's common stock during the period August 4, 1994 through October 26, 1995. It alleged violations of the federal securities laws arising out of purported misrepresentations and non-disclosures concerning the Company and its financial condition. The matter has been settled on a basis satisfactory to the Company. A settlement agreement has been entered into, subject to court approval, which approval is anticipated by the end of the calendar year. Earnings as reported reflect full settlement of the lawsuit. Item 4. Submission of Matters to a Vote of Security Holders (a) The Company held its 1996 Annual Meeting of Shareholders on June 3, 1996. Holders of 8,280,539 Common Shares of the Company were present representing approximately 84% of the Company's 9,875,000 Common Shares issued and outstanding. (b) The following persons were elected as members of the Company's Board of and Directors to serve until the annual meeting following their election or (c) until their successors are duly elected and qualified. Each person received the number of votes for or the number of votes with authority withheld indicated below. Name Votes For Votes Withheld ---- --------- -------------- Martin P. Doolan 8,229,583 50,956 Edward S. Finkelstein 8,232,258 48,281 Thomas R. Ketteler 8,233,158 47,381 George Kolber 8,232,858 47,681 John L. Marakas 8,232,658 47,881 Jay L. Schottenstein 8,231,308 49,231 Saul Schottenstein 8,219,608 60,931 David W. Thompson 8,230,883 49,656 On August 30, 1996, Edward S. Finkelstein resigned from the Board of Directors. (d) Not applicable. 12 13 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits
Exhibit No. Description 23. Acknowledgment of Independent Accountants
13 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated September 13, 1996 American Eagle Outfitters, Inc. (Registrant) /s/ LAURA A. WEIL ------------------------------------ Laura A. Weil Executive Vice President and Chief Financial Officer /s/ DALE E. CLIFTON ------------------------------------ Dale E. Clifton Vice President, Controller and Chief Accounting Officer 14 EX-23 2 EXHIBIT 23 1 Exhibit 23 Acknowledgment of Ernst & Young LLP The Board of Directors and Stockholders American Eagle Outfitters, Inc. We are aware of the incorporation by reference in the Registration Statements (Forms S-8) of American Eagle Outfitters, Inc. pertaining to the American Eagle Outfitters, Inc. 1994 Stock Option Plan, the Stock Fund of the American Eagle Outfitters, Inc. Profit Sharing and 401(k) Plan, the American Eagle Outfitters, Inc. Employee Stock Purchase Plan, and the American Eagle Outfitters, Inc. 1994 Restricted Stock Plan of our report dated August 23, 1996 relating to the unaudited consolidated interim financial statements of American Eagle Outfitters, Inc. which are included in its Form 10-Q for the quarter ended August 3, 1996. Pursuant to Rule 436(c) of the Securities Act of 1933, our reports are not a part of the registration statement prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933. Pittsburgh, Pennsylvania August 23, 1996 15 EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE QUARTER ENDED AUGUST 3, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000919012 AMERICAN EAGLE OUTFITTERS, INC. 3-MOS FEB-01-1997 MAY-05-1996 AUG-03-1996 16,327 0 2,667 0 34,329 62,863 53,110 20,923 97,360 35,765 0 52,535 0 0 9,060 97,360 70,257 70,257 49,018 49,018 20,945 0 (275) 569 223 346 0 0 0 346 0.04 0.04
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